Lenovo Group Ltd., is seeking to buy Packard Bell in order to boost its European competitiveness.
The Chinese company (originally Legend) is the world's third largest producers of personal computers. The deal with Packard Bell which controls two per cent of the global market would be worth around $800 million (€581.81).
Lenovo's shares, which have seesawed since the firm released a strong set of quarterly earnings, stood 2 per cent higher today in a stronger market after the firm revealed it hoped to buy its rival in order to stengthen its European operation.
If successful, the deal would allow the Chinese computer company to quickly gain market share in Europe where it is ranked sixth and is barely profitable, while it continues to digest and revive a global PC business bought from IBM in 2005. But it could expose the firm to an intense battle for consumers with the likes of Dell Inc., Hewlett Packard and aggressive Acer Inc.
One of a handful of Chinese companies trying to forge a global brand by investing abroad, Lenovo dropped to fourth globally in the first three months of 2007 but reclaimed the third spot from Acer a quarter later, riding an upswell of corporate demand.
To drive sales to consumers, the company now plans to launch a range of notebooks in January and desktops in March or April next year.
Packard Bell was once a leading PC vendor in the United States but withdrew from the world's largest PC arena in 1999 to focus on Europe. Deutsche Bank estimates it chalked up between €1.5 billion and €2 billion of revenue in 2006 and analysts say it would be a good fit for Lenovo.
Lenovo shares soared 61 per cent in the second quarter compared with the Hong Kong benchmark index's 10 per cent rise. It now trades at 20 times estimated earnings, versus HP's 17, Acer's 12 and Dell's 21.
